OTTAWA: Hudson’s Bay Co. (HBC) had a “transformative” second quarter according to its head Richard Baker, putting in place strategies that should set its course for years to come.
The retail chain bought German department store Galeria Kaufhof, spun off some its real estate into joint ventures, paid down debt and grew its digital sales.
It also returned to profitability after two quarters of losses as it absorbed the costs of some of the changes it has made in the past two years.
HBC’s net income for second quarter ended Aug. 1 was $67 million, which compared with a loss of $36 million in the second quarter of 2014 and $33 million in the first quarter of 2015. Its retail sales totalled $2.04 billion — up $269 million or 15.2 per cent from a year earlier.
HBC owns The Bay, Home Outfitters, Saks Fifth Avenue, discount chain Off 5th and Lord & Taylor.
A higher U.S. dollar, which pushed up the value of sales at its U.S. holdings, as well as a 30 per cent increase in digital sales helped boost revenue in the quarter.
“This was a transformative quarter for us, with multiple major initiatives that will shape HBC for years to come,” HBC executive chairman Richard Baker said in a news release.
Among the moves that helped the bottom line were two real estate joint ventures with Simon Property Group and with RioCan REIT, which helped HBC raise cash. The retailer has sold off or leased its global locations in the Simon Property Group joint venture and its Canadian locations in the RioCan REIT.
“As part of these transactions, we paid down more than $1 billion in debt, providing us with additional flexibility to invest in our retail businesses,” Baker said.
Baker said all of HBC’s businesses are “in excellent shape” for the fall and holiday quarters, which typically are the busiest for retailers.
In constant dollar terms, its consolidated same store sales increased by 4.2 per cent. Same-store sales are a key metric for retailers to assess whether they are doing better than last year.
The fastest growing segment was discount retailer Off 5th, where sales rose 12.7 per cent.
HBC will invest a total of $50 million in strategic growth initiatives in 2015 including an accelerated pace of new store openings at Off 5th, strengthening its digital and all-channel presence and capabilities, and planning for the 2016 expansion of Saks and Off 5th into Canada.
It also plans $350-$400 million in capital investments in its stores. Total sales for 2015 are projected to hit $9-$9.3 billion.
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